Merck sues U.S. government over 'sham' drug price negotiation law

June 6, 2023

Merck & Co. has filed a lawsuit against the U.S. government over the drug price negotiation program contained in the Inflation Reduction Act (IRA), becoming the first drugmaker to formally challenge the law.

Last summer, as part of the IRA, Congress established the “Drug Price Negotiation Program” for Medicare. The program was billed as a framework under which federal officials and drug manufacturers can negotiate voluntary price agreements that will save money for U.S. taxpayers while ensuring that pharma companies remain able to continue investing into R&D of new lifesaving medicines.

But in a lawsuit filed in the U.S. District Court for the District of Columbia, Merck argues that in practice, this isn't the case.

"In reality, however, this 'Drug Price Negotiation Program' is a sham. It involves neither genuine 'negotiations' nor real 'agreements.'" said Merck in its 28-page complaint. "This is not 'negotiation.' It is tantamount to extortion."

The drugmaker argue the program is unconstitutional. According to Merck, the Fifth Amendment requires the U.S. government pay “just compensation” if it takes property for public use — but the IRA allows the government to obtain innovations without providing fair value for them. Merck also argues that the IRA creates the false impression that drugmakers are voluntary participants in the program by coercing them to sign an agreement that says the set prices are the fair result of a negotiation — and this violates the First Amendment.

Merck filed its suit against the U.S. Department of Health & Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS), as well as HHS Secretary Xavier Becerra and CMS Administrator Chiquita Brooks-LaSure

A Merck spokesperson told media outlets that the company will litigate the matter all the way to the Supreme Court if necessary.